GBP/USD Price Forecast: Weakens below 1.3550, but maintains bullish bias above key averages
- GBP/USD softens to around 1.3520 in Tuesday’s early European session.
- The major pair keeps the bullish vibe above the key 100-day EMA.
- The immediate resistance level emerges at 1.3610; the initial support level is seen at 1.3515.
The GBP/USD pair loses ground to near 1.3520 during the early European session on Tuesday. Rising geopolitical tensions after reports of Iranian missile strikes against US naval vessels near the Strait of Hormuz boost a safe-haven currency such as the US Dollar (USD) and act as a headwind for the major pair.
Earlier on Tuesday, Iranian media, citing a military source, reported that the US struck two civilian vessels transporting goods to Iran. The report added that the vessels were not linked to the Islamic Revolutionary Guard Corps (IRGC). Iranian sources said five civilians were killed.
US President Donald Trump on Monday warned Iran that it will be “blown off the face of the earth” if it targets US ships that are protecting commercial vessels transiting the strait.
The Bank of England (BoE) held the bank rate steady at 3.75% as widely expected, presenting a scenario framework that suggests rate hikes could be appropriate but avoiding any pre-commitment. BoE Governor Andrew Bailey warned of "forceful tightening" if energy price shocks from the Middle East conflict continue to drive inflation
Technical Analysis:
In the daily chart, GBP/USD retains a mildly bullish near-term bias as spot holds above both the 20-day simple moving average (SMA) and the 100-day exponential moving average (EMA). The pair is consolidating in the upper half of its recent volatility envelope, with the Relative Strength Index (14) at 53.8 hinting at steady but not overextended bullish momentum while price approaches the upper band region.
On the topside, immediate resistance is located at the Bollinger upper band near 1.3610, where a clear break would open the door to further gains. On the downside, initial support emerges at the Bollinger middle band around 1.3515, followed by the 100-day EMA at 1.3446 and the lower Bollinger band near 1.3418, levels that should limit pullbacks while the broader constructive tone remains in place.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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